Sunday, January 22, 2017

Individual health insurance without a mandate is a scam

Given President Trump's selection of Sen. Tom Price for HHS Secretary, one should expect the replacement plan to be similar to the Emp[o]wering Patients First Act.

He's probably right, and that scares the hell out of me, for a very simple reason: individual health insurance without a mandate cannot possibly work. Yes, you will be able to buy something that looks like an insurance policy. The insurance companies will happily take your money as long as you are healthy. But the instant you get sick they will drop you like a hot rock. An individual health policy without a government mandate is necessarily a scam. No free market mechanisms can possibly change this. If you have cancer, no one is going to insure you if they don't have to.

Health insurance only has value if an insurance company has some reason to keep you on board after you get sick. In the case of group plans, that reason is that they can't drop you individually. The only way they can drop you is to drop the whole group. The reason employer-based insurance works even in the absence of government mandates is that employers do two things: they aggregate people into groups that are large enough that you can use statistics to manage the risk. And they filter out the sickest and most expensive people. If you're over 65, or if you already have cancer, you're less likely to be applying for a job than if you're in your 20s and healthy. But if you are by yourself, in the absence of a government mandate like the one provided by the ACA, they can drop you individually. And they surely will. What makes it a scam is that most people don't get sick, and so most people will think they have insurance (or at least access to insurance) even though in reality they don't.

In California, it doesn't take much to make a group: you only need two people. So my wife and I started a company, and for the last ten years that has qualified us for group insurance. But with the advent of the ACA, California changed the rules. You still only need two people, but now they can't be related to each other. So I'm now on an ACA individual plan. If the ACA is repealed I, and about 20 millions other Americans, will be totally hosed. The only way I can get back on a group rate is to shutter my company and go back to work as an employee, or get divorced. It is no small irony that I will be faced with this choice because of the party that ostensibly wants to support entrepreneurship and family values.

This is what happens when you deny reality. You can choose to ignore the laws of physics and the laws of economics, but they will not ignore you. Sooner or later, if the Republicans are not stopped somehow, sea levels will rise and people will die.

To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications. [Emphasis added]

Note the complete absence of any mention of impact on the overall sustainability of the system, or the actual health and well-being of patients. Trump's quality metric is purely financial. Fiscal burdens are bad, and so they need to be eliminated, period, end of story. There are no other considerations. If a few more people die, who cares.

27 comments:

Take a look at figure 2 in the Robert Kopp paper "Temperature-driven global sea-level variability in the Common Era", and try to figure out all by yourself what possible problems might lurk there. I think it is nice example, even though figure 2 (C) deserves one thorough look as well, and figure 2S in the supplement is also good material.

BTW: Whatever you find or don't find, have fun, I don' actually have interest in discussing this topic – it is wasted time – and am out of this discussion here. Just wanted to give you a last blue pill / red pill moment, I thought you deserved it – but either way you choose, have fun.

How is it not bogus that employees can deduct the cost of healthcare from their taxes but individuals cannot? We've created a system which gives corporations the kind of power which allows this problematic situation to exist. Had individuals long been able to get health insurance coverage on their own and gotten the appropriate deductions, they would probably have figured out ways to organize and thus not fall prey to the problem you describe.

Let's be honest with ourselves about when government regulation creates problems? I'm not against all regulation, I'm just for being honest about what is true—for telling the truth, the whole truth, and nothing but the truth.

That's doubtful. Look at how well labor unions have fared lately. It seems unlikely that health-care unions would do any better.

The other insidious thing about this is that most people are relatively healthy, and so they have never directly experienced getting the short end of the insurance stick. So it's very hard to convince people to do *anything* about the situation (which is why the individual mandate is needed), let alone something that actually requires *work*, like organizing.

> That's doubtful. Look at how well labor unions have fared lately. It seems unlikely that health-care unions would do any better.

It seems rather obvious to me that it would be much harder to paint health-care unions with as nasty a brush as labor unions. For example, at UC Berkeley there were a series of break-ins where the criminals would smash the little glass window in doors and then reach in and turn the door knob. A simple little piece of plexiglass could be easily installed to thwart this attack. The union was taking forever to get around it, and the break-ins were increasing—including perhaps some assault & battery. So some students or staff did some of the fixes themselves. They got fined. It's not hard to see why unions can easily get painted badly. What's the corresponding example for health-care unions?

> The other insidious thing about this is that most people are relatively healthy, and so they have never directly experienced getting the short end of the insurance stick. So it's very hard to convince people to do *anything* about the situation (which is why the individual mandate is needed), let alone something that actually requires *work*, like organizing.

Well, you certainly can fail to teach people the most basic things about risk & statistics (which are also important for things like reducing car accidents) and instead expect them to just trust the experts/​government. But it seems that this kind of infantilization of the US populace is not a good strategy.

If you go back a ways in US history, I think you'll find that people would actually do "*work*". However, various decisions have been made which have made people less likely to want to do that. See, for example, Nina Eliasoph's Avoiding Politics: How Americans Produce Apathy in Everyday Life. The bread & circus that is consumerism & entertainment also contributes to this. Don't mistake contingent social circumstances for permanent human nature (or: permanent distribution of human talent/IQ).

Well, I wouldn't be spending so much time writing this blog if I thought it was completely hopeless. I just don't believe that health-care unions would work, and not just because unions in general don't work. It's because the union would have the same perverse incentive to exclude sick people as the insurance companies do.

The free market simply does not work for health care because we as a society are generally not willing to just let sick people die. (Personally, I think that's a good thing.)

> I have no idea, but the right-wing propaganda machine is very clever. I'm pretty sure they'd come up with something should the need arise.

We're going to have to talk about what seems like the implicit political philosophy undergirding this reasoning. The idea that the federal government is required to solve this stuff—that no form of subsidiarity would work—seems rather dangerous to me. It also seems unnecessary, unless you insist that US citizens are, on average, irreparable pathetic when it comes to civic responsibility. We are clearly in a bad state now, but the obvious thing seems to be to analyze it, scientifically and philosophically.

> It's because the union would have the same perverse incentive to exclude sick people as the insurance companies do.

How does federalizing (or would it be better to say 'centralizing'?) increase our ability to avoid perverse incentives? You've heard of regulatory capture, right? You also read the intro & conclusion to Rationality and Power: Democracy in Practice, where you saw that the empirical evidence shows that the greater the power differential, the less the rationality and the more the rationalizing. Centralizing power increases power differentials.

> The free market simply does not work for health care because we as a society are generally not willing to just let sick people die. (Personally, I think that's a good thing.)

It's not clear to me that you have sufficient data to prove that the free market necessarily cannot do as good of a job as the government. What I will say is that I think the government ought to have, long ago, required much more transparency from insurance companies. See, free markets are free markets without sufficient information transparency. I find that to be frequently forgotten when the term 'free market' is thrown about.

I have personal experience working with hospital billing systems and the incredibly complex contracts which hospitals make with insurance companies. It's kind of like the tax code: if there are no reasonable requirements of comprehensible transparency, then pedants will thrive on introducing technical complexity to get a bit of advantage here, a bit of advantage there. Over time, you get a distorted sense of reality, e.g. where the hospital's recorded prices for various things have little correlation to reality. Instead, the prices are adjusted to maximize return on insurance claims. The problem is opaque bureaucratic rationality, and that isn't magically solved via turning operations over to the government.

>The insurance companies will happily take your money as long as you are healthy. But the instant you get sick they will drop you like a hot rock. An individual health policy without a government mandate is necessarily a scam. No free market mechanisms can possibly change this.

Insurance companies have all sorts of nasty tricks. 1. They drop you when you get sick [as above]2. They can't drop you, but the can increase your premium - say, to $20,000 per month3. They split the insurance pool successively over the years. Healthy people are split into groups with low premiums. Sick people are split into groups with high premiums.

>If you have cancer, no one is going to insure you if they don't have to.

If you know you have a disease, at that point it's not "insurance."

The problem here is adverse selection. This problem needs to be addressed in any insurance reform. The ACA addressed this via the "individual mandate."

Group plans typically address this via having a once-yearly enrollment period.

The problem is thus: If insurers are required to insure you (guaranteed issue), how to you prevent people from only buying insurance once they are sick?

>If the ACA is repealed I, and about 20 millions other Americans, will be totally hosed.

> The reason employer-based insurance works even in the absence of government mandates is that employers do two things: they aggregate people into groups that are large enough that you can use statistics to manage the risk. And they filter out the sickest and most expensive people.

Part of the "filtering" also includes firing you if you haven't been at work for 6 months. Which one could be for some very bad medical problems. Then you'd have to go on COBRA. After COBRA, you're hosed.

The Federal government created the problems with medical care markets.1. During WW 2, the Feds imposed wage controls. To attract workers, companies started offering health insurance. Employers could naturally deduct the expense of this from their taxes. 2. Medicare was created in 1966.

The problem with employer provided health insurance is that it leads to "third party syndrome" -- customers don't pay attention to prices, as they're not paying for it.

The problem with Medicare is that medical providers quickly learned that if they charged more, the government pays more. Hence, they raise prices every year. [The Feds have also screwed up college education in the same way.] This drives medical price inflation.

Other Issues

Entangled meaning: "Health Insurance" is conflated for two purposes. One is just paid health care -- medical visits for blood checks, immunizations, minor illnesses, etc. The second is catastrophic coverage - you need medical care due to extreme trauma, or a life threatening disease.

Baby boomers coming through: The "secret" of medicine is that people don't get dread diseases or chronically sick until they're over 40. Then, after 70, anything can happen. Hence, most health care is consumed by old people, followed by the middle-aged.

Need more doctors: The Empowering Patients First Act does contain a provision to speed the importation of doctors - by giving them priority immigration status. Another way to increase the supply of doctors would be tuition support (risk: medical school tuition ratchets up), especially for fields that we think we need more of (family practice, psychiatry, endocrinology, whatever).

More doctors reduces prices: More supply in the marketplace should result in more price competition, driving medical prices down.

More doctors increases costs: Yet, with more doctors out there, those additional doctors are ordering tests, performing procedures, and prescribing drugs. Medical care costs increase with more doctors.

Third party payers: Patients don't care about prices, as they never see them.

Single payer leads to short capacity: In goverment single-payer plans, medical care is often in shortage - hospital capacity, testing capacity, and supply of doctors. Heres how that works. A yearly budget is passed. It will contain a certain amount of money to buy, say, MRI machines. But what if the demand for MRI imaging is exceeding the capacity of the MRI facilities? Can we get more machines this year? Well, that's a problem - it's not in the budget. Under pressure to stick to the budget, more machines aren't purchased.

Private markets leads to excess capcity: Now consider the above MRI scenario from the private market. A company sees MRI imaging demand increasing. "Hey, I could make more profit if I bought some more MRI machines." The company buys the MRI machines and installs them as fast as possible. However, a different company was thinking the same thing, and did the same thing -- now there are too many MRI machines for the community. The federal government and some states address this buy requiring a Certificate Of Need (CON) before expansions, or creating of new facilities are allowed. Ah, but with regulatory capture, existing hospitals can gain monopoly power by getting regulators to restrict the issueance of CONs.

AMA accredits medical schools: The AMA is the only accreting body. If therefore acts to restrict the opening of medical schools to reduce the supply of doctors, in order to maintain high wages for existing doctors.

href="https://en.m.wikipedia.org/wiki/Medicare_(United_States)#Graduate_medical_education">Medicare pays for graduate medical education: Medicare pays the salaries of residents at teaching hospitals ($5.7 billion a year). Teaching hospitals are screaming, "We need Medicare to increase the budget for resident salaries so we can train more residents". I ask: why did Medicare get in the position that it is paying resident salaries? Plus, the teaching hospitals are being a bunch of whiney spoiled brats - the teaching hospitals earn huge profits from the labor of those residents, but they also want the residents for free. They could easily create more resident positions - they pay for themselves.

> The Federal government created the problems with medical care markets.

Yes, but so what? All of the people who were in the government when that happened are long gone, and this generation has to play the hand it's dealt. Also, just because the government created *this* set of problems doesn't mean that everything was hunky dory before, and it *certainly* doesn't mean that everything will be hunky dory if we just undo what has been done. The world has changed.

Yes, of course there are trade-offs. What bothers me is that the Republicans are not honest about this. If they were up-front about it and said, "We're going to privatize the markets. That will drive down costs and increase supply. But if your grandmother gets sick without having set enough aside to pay for her treatment and she can't raise enough from the local church group, we're going to let her die." I would be perfectly fine with that. But that's not what they say. They say, "Government interference is the root of all the problems we have, and all the problems we could ever possibly have, and if we just get government out of health care everything will be perfect." That's a lie. I don't like lies. Lies lead to bad decisions.

BTW, I would be perfectly OK with letting granny die under certain circumstances. A tremendous amount of money gets wasted on heroic measures that everyone knows won't do any good and are just done to assuage the emotions of the families. I think we can find more cost-effective ways to help people deal with the very real emotional pain of having a loved one die. But the Republicans took the lead in vilifying that position when they started talking about "death panels."

> > @Publius: The Federal government created the problems with medical care markets.

> @Ron: Yes, but so what? All of the people who were in the government when that happened are long gone, and this generation has to play the hand it's dealt. Also, just because the government created *this* set of problems doesn't mean that everything was hunky dory before, and it *certainly* doesn't mean that everything will be hunky dory if we just undo what has been done. The world has changed.

The reason to know your history is to understand what situations we face are contingent on possibly reversible choices vs. what situations we face are probably immovable rocks. For example, let's look at those wage controls which pushed companies to cover not just catastrophic health insurance, but also routine healthcare. You bastardize the word 'insurance', distorting the public's understanding of what 'insurance' is, and removing an opportunity for them to learn to do a bit of budgeting for healthcare costs.

If you're worried about idiocy of masses of the US populace, I suggest investigating all the various things which were done to remove agency from them. One example would be healthcare 'insurance' which covers their routine medical costs, resulting in (i) lack of transparency; (ii) less requirement of budgeting responsibility. Well, what happens when you present people with (i) and (ii) in many different domains? They become juveniles, unable to really understand what is going on, liable to vote for an authoritarian leader when things get rough.

BTW, one reason the ACA website failed on launch is that originally, it was not planned that everyone would be forced to log in for auto-computation of subsidies. Instead, people would be given an option to browse and figure them out themselves. Software engineers did not plan on every single person being forced to log in. So you shift from lots of static pages being served to intensive DB activity for each request. Now, why did the switch get flipped to force everyone to log in?

> Yes, of course there are trade-offs. What bothers me is that the Republicans are not honest about this.

I wonder if @Publius disagrees with this, but I have very little nice to say about Republicans. Perhaps I could say that Democrats attribute too little agency to your common person while Republicans attribute too much agency. Both of these errors make it harder for people to mature, to become adults. If only science could help us on this issue... :-p

> But if your grandmother gets sick without having set enough aside to pay for her treatment and she can't raise enough from the local church group, we're going to let her die."

Where are the hard, public conversations of just how much we'll let grandmother cost before we let her die? Because if I let my grandmother cost too much, I'm being selfish and I'm probably depriving a child somewhere of as good healthcare as [s]he could otherwise get. BTW it's not clear to me that either side is approaching this issue honestly. For example: "death panels".

> The reason to know your history is to understand what situations we face are contingent on possibly reversible choices

OK, fair enough. But I take issue with the implication that because the current set of problems was caused by government action then the best way to solve them is to simply undo those government actions.

> Democrats attribute too little agency to your common person

How so?

> BTW it's not clear to me that either side is approaching this issue honestly

It's true that the Democrats are not without sin, but at least they don't embrace the notion of "alternative facts".

> But I take issue with the implication that because the current set of problems was caused by government action then the best way to solve them is to simply undo those government actions.

Of course. Perhaps we could talk about the various different market failures which stop the free market model from accurately referring to reality. For example, how about monopoly conditions on information, which the government could legislate into transparency? I'm baffled as to why more people aren't talking about this, unless the prevailing assumption is, at core, a nanny state or something like Ayn Rand's utopia.

Surely you are aware of how much you can distort understanding of a situation by simply never talking about certain things?

> > Democrats attribute too little agency to your common person

> How so?

This is probably a discussion best had with the sociologist you'll meet today. He may actually disagree with me on this one. I can post a redux on here afterward.

> It's true that the Democrats are not without sin, but at least they don't embrace the notion of "alternative facts".

Correct, but it is not clear to me that political correctness is somehow a lesser sin. See, instead of presenting 'alternative facts', you can simply make it exceedingly costly in reputation to state certain facts or question certain facts. Howard S. Schwartz provides some very interesting examples of this in Society Against Itself: Political Correctness and Organizational Self-Destruction; I could present one or two if you'd like. I worry that Schwartz is one of those "a place for everybody / everybody in his place" kind of people, but it's not clear that sufficiently undermines the hard evidence and analysis thereof which he provides.

>> The Federal government created the problems with medical care markets.

>Yes, but so what? All of the people who were in the government when that happened are long gone, and this generation has to play the hand it's dealt. Also, just because the government created *this* set of problems doesn't mean that everything was hunky dory before, and it *certainly* doesn't mean that everything will be hunky dory if we just undo what has been done. The world has changed.

It might give you pause use more government involvement as a solution, given the history of how that has worked out.

Although to your point, we have to start where we are and move forward. It would be unlikely to remove government from it completely.

The way to "undo what has been done" is as part of passing the replacement. I.e., you can't have a period of time with . . . nothing.

>Yes, of course there are trade-offs. What bothers me is that the Republicans are not honest about this.

>I think we can find more cost-effective ways to help people deal with the very real emotional pain of having a loved one die. But the Republicans took the lead in vilifying that position when they started talking about "death panels."

>> The Federal government created the problems with medical care markets.

>Yes, but so what? All of the people who were in the government when that happened are long gone, and this generation has to play the hand it's dealt. Also, just because the government created *this* set of problems doesn't mean that everything was hunky dory before, and it *certainly* doesn't mean that everything will be hunky dory if we just undo what has been done. The world has changed.

It might give you pause use more government involvement as a solution, given the history of how that has worked out.

Although to your point, we have to start where we are and move forward. It would be unlikely to remove government from it completely.

The way to "undo what has been done" is as part of passing the replacement. I.e., you can't have a period of time with . . . nothing.

>Yes, of course there are trade-offs. What bothers me is that the Republicans are not honest about this.

>I think we can find more cost-effective ways to help people deal with the very real emotional pain of having a loved one die. But the Republicans took the lead in vilifying that position when they started talking about "death panels."

Single payer leads to short capacity: In goverment single-payer plans, medical care is often in shortage - hospital capacity, testing capacity, and supply of doctors. Heres how that works. A yearly budget is passed. It will contain a certain amount of money to buy, say, MRI machines. But what if the demand for MRI imaging is exceeding the capacity of the MRI facilities? Can we get more machines this year? Well, that's a problem - it's not in the budget. Under pressure to stick to the budget, more machines aren't purchased.

Private markets leads to excess capcity: Now consider the above MRI scenario from the private market. A company sees MRI imaging demand increasing. "Hey, I could make more profit if I bought some more MRI machines." The company buys the MRI machines and installs them as fast as possible. However, a different company was thinking the same thing, and did the same thing -- now there are too many MRI machines for the community. The federal government and some states address this buy requiring a Certificate Of Need (CON) before expansions, or creating of new facilities are allowed. Ah, but with regulatory capture, existing hospitals can gain monopoly power by getting regulators to restrict the issueance of CONs.

AMA accredits medical schools: The AMA is the only accreting body. If therefore acts to restrict the opening of medical schools to reduce the supply of doctors, in order to maintain high wages for existing doctors.

href="https://en.m.wikipedia.org/wiki/Medicare_(United_States)#Graduate_medical_education">Medicare pays for graduate medical education: Medicare pays the salaries of residents at teaching hospitals ($5.7 billion a year). Teaching hospitals are screaming, "We need Medicare to increase the budget for resident salaries so we can train more residents". I ask: why did Medicare get in the position that it is paying resident salaries? Plus, the teaching hospitals are being a bunch of whiney spoiled brats - the teaching hospitals earn huge profits from the labor of those residents, but they also want the residents for free. They could easily create more resident positions - they pay for themselves.

Single payer leads to short capacity: In goverment single-payer plans, medical care is often in shortage - hospital capacity, testing capacity, and supply of doctors. Heres how that works. A yearly budget is passed. It will contain a certain amount of money to buy, say, MRI machines. But what if the demand for MRI imaging is exceeding the capacity of the MRI facilities? Can we get more machines this year? Well, that's a problem - it's not in the budget. Under pressure to stick to the budget, more machines aren't purchased.

Private markets leads to excess capcity: Now consider the above MRI scenario from the private market. A company sees MRI imaging demand increasing. "Hey, I could make more profit if I bought some more MRI machines." The company buys the MRI machines and installs them as fast as possible. However, a different company was thinking the same thing, and did the same thing -- now there are too many MRI machines for the community. The federal government and some states address this buy requiring a Certificate Of Need (CON) before expansions, or creating of new facilities are allowed. Ah, but with regulatory capture, existing hospitals can gain monopoly power by getting regulators to restrict the issueance of CONs.

AMA accredits medical schools: The AMA is the only accreting body. If therefore acts to restrict the opening of medical schools to reduce the supply of doctors, in order to maintain high wages for existing doctors.

href="https://en.m.wikipedia.org/wiki/Medicare_(United_States)#Graduate_medical_education">Medicare pays for graduate medical education: Medicare pays the salaries of residents at teaching hospitals ($5.7 billion a year). Teaching hospitals are screaming, "We need Medicare to increase the budget for resident salaries so we can train more residents". I ask: why did Medicare get in the position that it is paying resident salaries? Plus, the teaching hospitals are being a bunch of whiney spoiled brats - the teaching hospitals earn huge profits from the labor of those residents, but they also want the residents for free. They could easily create more resident positions - they pay for themselves.

>> The Federal government created the problems with medical care markets.

>Yes, but so what? All of the people who were in the government when that happened are long gone, and this generation has to play the hand it's dealt. Also, just because the government created *this* set of problems doesn't mean that everything was hunky dory before, and it *certainly* doesn't mean that everything will be hunky dory if we just undo what has been done. The world has changed.

It might give you pause use more government involvement as a solution, given the history of how that has worked out.

Although to your point, we have to start where we are and move forward. It would be unlikely to remove government from it completely.

The way to "undo what has been done" is as part of passing the replacement. I.e., you can't have a period of time with . . . nothing.

>Yes, of course there are trade-offs. What bothers me is that the Republicans are not honest about this.

>I think we can find more cost-effective ways to help people deal with the very real emotional pain of having a loved one die. But the Republicans took the lead in vilifying that position when they started talking about "death panels."

Single payer leads to short capacity: In goverment single-payer plans, medical care is often in shortage - hospital capacity, testing capacity, and supply of doctors. Heres how that works. A yearly budget is passed. It will contain a certain amount of money to buy, say, MRI machines. But what if the demand for MRI imaging is exceeding the capacity of the MRI facilities? Can we get more machines this year? Well, that's a problem - it's not in the budget. Under pressure to stick to the budget, more machines aren't purchased.

Private markets leads to excess capcity: Now consider the above MRI scenario from the private market. A company sees MRI imaging demand increasing. "Hey, I could make more profit if I bought some more MRI machines." The company buys the MRI machines and installs them as fast as possible. However, a different company was thinking the same thing, and did the same thing -- now there are too many MRI machines for the community. The federal government and some states address this buy requiring a Certificate Of Need (CON) before expansions, or creating of new facilities are allowed. Ah, but with regulatory capture, existing hospitals can gain monopoly power by getting regulators to restrict the issueance of CONs.

AMA accredits medical schools: The AMA is the only accreting body. If therefore acts to restrict the opening of medical schools to reduce the supply of doctors, in order to maintain high wages for existing doctors.

href="https://en.m.wikipedia.org/wiki/Medicare_(United_States)#Graduate_medical_education">Medicare pays for graduate medical education: Medicare pays the salaries of residents at teaching hospitals ($5.7 billion a year). Teaching hospitals are screaming, "We need Medicare to increase the budget for resident salaries so we can train more residents". I ask: why did Medicare get in the position that it is paying resident salaries? Plus, the teaching hospitals are being a bunch of whiney spoiled brats - the teaching hospitals earn huge profits from the labor of those residents, but they also want the residents for free. They could easily create more resident positions - they pay for themselves.

Single payer leads to short capacity: In government single-payer plans, medical care is often in shortage - hospital capacity, testing capacity, and supply of doctors. Here's how that works. A yearly budget is passed. It will contain a certain amount of money to buy, say, MRI machines. But what if the demand for MRI imaging is exceeding the capacity of the MRI facilities? Can we get more machines this year? Well, that's a problem - it's not in the budget. Under pressure to stick to the budget, more machines aren't purchased.

Private markets leads to excess capacity: Now consider the above MRI scenario from the private market. A company sees MRI imaging demand increasing. "Hey, I could make more profit if I bought some more MRI machines." The company buys the MRI machines and installs them as fast as possible. However, a different company was thinking the same thing, and did the same thing -- now there are too many MRI machines for the community. The federal government and some states address this buy requiring a Certificate Of Need (CON) before expansions, or creating of new facilities are allowed. Ah, but with regulatory capture, existing hospitals can gain monopoly power by getting regulators to restrict the issuance of CONs.

AMA accredits medical schools: The AMA is the only accreting body. If therefore acts to restrict the opening of medical schools to reduce the supply of doctors, in order to maintain high wages for existing doctors.

href="https://en.m.wikipedia.org/wiki/Medicare_(United_States)#Graduate_medical_education">Medicare pays for graduate medical education: Medicare pays the salaries of residents at teaching hospitals ($5.7 billion a year). Teaching hospitals are screaming, "We need Medicare to increase the budget for resident salaries so we can train more residents". I ask: why did Medicare get in the position that it is paying resident salaries? Plus, the teaching hospitals are being a bunch of whiney spoiled brats - the teaching hospitals earn huge profits from the labor of those residents, but they also want the residents for free. They could easily create more resident positions - they pay for themselves.